Emerging Markets: Preview of the Week Ahead

EM FX ended last week on a soft note despite lower US rates. The dollar regained some traction that it lost over the course of the week, when markets pushed out Fed tightening beyond March. Treasury Secretary Mnuchin also seemed to push out fiscal stimulus. There is a full slate of Fed speakers this week, and Wednesday sees the release of the Fed’s Beige book that was prepared for the March 15 FOMC meeting.

Idiosyncratic events helped EM last week too, as MXN was boosted by the FX hedging plan and signs of thawing US-Mexico relations. Looking ahead, China gives us its first glimpse of the mainland economy in February. EM trade and inflation data for February will also start to be reported, with stronger growth and rising price pressures making a case for monetary tightening this year in Asia and EMEA.

Mexico reports January trade Monday, with a deficit of -$2.92 expected. Exports have risen y/y for two straight months now, driven by both petroleum and manufacturing. Imports have also risen y/y for two straight months now, driven mostly by intermediate goods. Consumer and capital goods imports are contracting still. Banco de Mexico releases its quarterly inflation report Wednesday.